One of the best things you can do if you want to build wealth over time is to invest. Thanks to the power of compound interest, investing offers one of the most effective ways to grow your nest egg and prepare for financial freedom down the road.
Unfortunately, there is a good chance right now that you believe some of the myths circulating about investing. And since it’s easy to get bogged down with misinformation and do nothing to build your finances for the future, I want to talk to you about four of these investing myths so you can stop believing them now.
1. Investing is Complicated
We feel like investing is complicated, but the reality is that it doesn’t have to be. While some investments are hard to understand, most of us don’t need to use those instruments to get started. Instead, there are plenty of simple and straightforward products, like ETFs and index mutual funds that keep things easy.
While you can certainly increase the complexity of your investments as you learn more, the truth is that it’s simple to start, and you don’t need anything complicated or special to succeed.
2. Investing is Too Risky
Thanks to the way humans process events, it’s easy to believe that investing is too risky. News about flash crashes, the Great Recession, and speculation about impending doom combine to create a climate of fear. Historically, though, the stock market as a whole hasn’t ever lost out over long periods of time (think 20 to 25 years).
If you have a long time horizon, you can make most investments work for you, including stocks. The key is to invest in the market as a whole, rather than pick individual stocks. Index funds that follow large swaths of the market can help you take advantage of long-term market gains to your benefit. Start as early as possible, invest for two or three decades, and you have a much better chance of building a solid nest egg.
3. No One Will Work With Me
Many of us still think that it’s important to have an investment adviser or some other professional to work with us if we want to invest. We remember scenes from movies and TV showing a rich guy calling a stock broker to make trades.
Today, the landscape is totally different. The Internet made it possible for you to use research tools and trading tools to make your own trades. On top of that, there are robo-advisors that can help you work out an investing plan and automatically invest each month.
If you want to work with a person, some financial advisors are available and willing to help you work out an investment strategy without requiring you to place assets under management. Many of these advisors charge a flat fee or an hourly fee. This makes it a little more affordable for you to get a bit of guidance for your plan.
4. I Need A Large Chunk of Capital to Start
Finally, many people are tripped up by the idea that they need a large chunk of capital to start investing. The good news is that you don’t. If you have $50 or $100 each month to spare, you can open an account and set up an automatic investing plan. There are even accounts and apps that will help you invest pocket change or as little as $5 per paycheck.
So don’t let investing myths keep you from building a firm financial foundation.
Readers, what other tips do you have for those who are scared to get started? How did you get over the fear of investing at the beginning?
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They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it's free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.